What Is VWAP? Session vs Anchored VWAP Explained

Before you read: Trading Volume Explained: Volume vs Open Interest

What you will learn

• What VWAP is and how it is calculated, in words and in a simple formula.
• The difference between session VWAP and anchored VWAP.
• What VWAP measures, why large firms use it as a benchmark, and what it cannot tell you.

What is VWAP?

If one price traded ten times as much as another, should both count equally in an average?

VWAP is the average price paid for every unit traded since a starting point, where each price counts in proportion to how much traded there.

A simple average treats every price the same. VWAP gives more weight to prices where more business happened. If 1,000 contracts trade at one price and 10 contracts trade at another, the first price matters 100 times as much.

How is VWAP calculated?

What would you need to record, trade by trade, to calculate it yourself?

In words: add up price times volume for every trade (or every bar) since the start, then divide by the total volume since the start.

In simple form:

VWAP = sum(price x volume) / sum(volume)

A small worked example, constructed for teaching:

VWAP = 100,800 / 1,000 = 100.80. The simple average of the three prices would be 101.00. VWAP sits below the simple average, pulled toward 100 and 101, because most of the volume traded at those two prices.

Charting platforms usually work from bars, not individual trades, so they need one price per bar. Many use the typical price, the average of the bar’s high, low and close; TradingView’s built-in VWAP, for example, uses it as the default source. That is a convention and an approximation: the exact benchmark definition uses the price and size of every trade. Platforms that calculate from every trade, or that use a different price per bar, can show slightly different VWAP values.

What is session VWAP?

When should a running average start over?

Session VWAP starts fresh at the beginning of each trading session and accumulates until the session ends. Then it resets. On an intraday chart you see a line that begins at the first bar of the session and then becomes smoother as the day goes on.

For futures that trade nearly around the clock, the “session” can be defined in more than one way: the full electronic session, or just the regular daytime session. Two traders looking at “VWAP” on the same market may be looking at different lines. Always check which session your platform uses.

Futures are leveraged products: one contract controls a large notional value for a comparatively small deposit. Leverage can cause losses larger than the amount invested.

What is anchored VWAP?

What changes if you choose the starting point yourself?

Anchored VWAP uses the same formula but starts from a point you choose: a swing high, a swing low, the start of the week, or the minute a scheduled report was released. It answers the question: “What has the average participant paid since this moment?”

Anchored VWAP does not reset at the end of the session. It keeps accumulating from the anchor until you remove it. Some traders anchor from points they consider significant so they can see whether price is above or below the average traded price since then.

VWAP diagram

Illustrative diagram constructed for teaching. Not real market data.

The diagram shows a constructed price path with a session VWAP that starts jumpy and smooths out, and an anchored VWAP starting from a marked swing low. It is constructed for teaching and is not real data.

What does VWAP measure?

When price is above the line, what can you honestly say?

VWAP measures one thing, built on trading volume: the volume-weighted average price since the start point. From that, you can describe:

• Whether price is currently above or below the average traded price since the start.
• How far price has moved from that average.
• Whether the line is rising, falling, or flat, which reflects where volume has been trading.

When price is above session VWAP, it means the latest price is higher than the volume-weighted average of the day so far. That is a description of position, not a forecast.

Why do large firms benchmark to VWAP?

If you had to buy a very large position over a day, how would anyone judge whether you did it well?

Large institutions such as pension funds, mutual funds and banks often need to buy or sell big positions across a whole day. If they bought all at once, they could push the price against themselves.

One common way to judge how well an order was carried out is to compare the average price achieved with VWAP over the same period. If a firm bought below the day’s VWAP, the trade is often described as being executed at a better-than-average price for that day. Brokers offer VWAP algorithms that try to spread an order across the day in proportion to expected volume, so the result lands close to VWAP.

This is why VWAP is widely watched: it is a common yardstick for execution quality. Being widely watched does not make it predictive. A benchmark tells you how a trade was carried out, not where price goes next.

What are the limits of VWAP?

When is the line least stable, and why?

• Early-session instability. In the first minutes of a session, VWAP is computed from very little volume, so it can jump around. Later in the day each new bar moves it less.
• Resets. Session VWAP starts again every session, so it says nothing about where yesterday’s volume traded unless you anchor it.
• Choice of start. Anchored VWAP depends entirely on where you anchor it. Different anchors give different lines.
• Data differences. Session definitions, bar-price approximations and contract-month handling in futures all change the value.
• Lag. VWAP describes the past. It moves after price moves.

What are VWAP bands?

If bands are not boundaries, what do they describe?

Some platforms draw bands above and below VWAP, often computed from the standard deviation of price around VWAP. They describe how spread out trading has been around the average. Like VWAP itself, they describe the past and are not targets or boundaries price must respect. For VWAP inside a full session description, see session replay.

What this does not tell you about VWAP

• VWAP does not tell you whether price will return to it or move away from it.
• Price above VWAP is not a “buy” and price below is not a “sell”. It is a description of where the latest price sits.
• VWAP does not show who traded or why.
• An institutional benchmark is about execution quality, not market direction.

Check yourself

Reflect on these; there is no score.

1. Why does VWAP move a lot in the first few minutes of the session and much less in the afternoon? Hint: how much total volume is in the denominator at each point.
2. Two traders disagree about where VWAP is on the same futures market. Name two reasons they might both be right. Hint: session definition and bar-price approximation.
3. What question does an anchored VWAP from a swing low answer? Hint: average price paid since that moment.
4. Why does “large firms watch VWAP” not mean “VWAP predicts price”? Hint: what a benchmark is used for.

Last reviewed November 8, 2026. Spotted a mistake? Report an error.